A blog about Steel Industry by Madhusoodhanan Sayeenathan

In continuation to the macro factors dealt in the previous post, let’s delve in to the micro factors to be considered in selecting a steel mill in this section.

The macro parameters can be common to other industries but they are quite indispensable while analyzing a steel plant.

Micro factors are those which determine how steel is being made and what is being made. Normally buyers emphasize more on micro factors.

Micro factors are as important as micro factors and should be analyzed in many aspects before selecting a source. These are the factors that would guide in answering “How to Select a Steel mill”? (Not in the order of importance).

1. Production facilities :

In Steel Industry, the quality of a mill mainly depends on the route of steel making and the facilities they employ. Since Steel is a high volume product, checking all the products for quality is improbable. So it is important to employ the right kind of Iron & Steel making route and right equipments to produce.

There are different ways of producing steel. These are mentioned in the order of preference / ranking from in terms of quality control.

Blast Furnace – Basic Oxygen Furnace

Corex –Energy Optimization Furnace

Sponge Iron ( Any kind of Sponge Iron making) – Electric Arc Furnace

Scrap – Electric Arc Furnace

Scrap – Induction Furnace

Some of the common facilities to all the above can be,

Vacuum degassing – This can control the gas levels in steel.

Ladle Refining furnace – Where required chemistry is achieved.

Continuous casting / Ingot Casting

Rolling

Finishing Facilities

To summarize, the mill with blast furnace and BOF will have better quality steel. It also depends on the application. For example for re-bars, even Induction furnace would do. So it is important to consider the application while looking at the production facilities.

2. Product Range:

The mill with a vast range of products stands to benefit as this can be a means of diversifying that can serve the steel demand of various end user industries.

If a mill has quite limited range of products aimed at only one industry, for example if a mill has only re-bars, then there is a risk if the construction industry performs bad.

Ideally many big steel plants have the combination of all, to ensure that they are present in all major products.

3. Quality Control:

As mentioned earlier, it is impractical to produce 100% good steel and it’s impossible to inspect 100% steel produced. This does not mean that Quality control is difficult.

By opting for higher levels of automations and by complying with efficient quality systems like Six Sigma, TPM, Quality control can be achieved at a steel plant.

Controlling the parameters at different stages of the production and ensuring that the production department follows this is one of the main roles.

Defining the rules of sample inspection and method of production also takes care of the quality.

The overall view should be that quality is not a role of quality control department and that it is a collective role of all the departments. This attitude will ensure reduction of defective steel products.

It is important that the steel buyer audits the relevant records at different levels of production to ensure the effectiveness of the system being followed.

The percentage of internal rejections & the number of customer complaints is a yardstick of how effective is the quality control.

4. Accreditation / Certification :

When a steel mill gets accredited to various renowned quality standards viz., ISO, and other private quality standards, it can be an indication that a system is in place.

Today ISO certification has become a mandatory and basic requirement of every steel plant.

Some steel plants servicing to automobile customers have also accredited with ISO/TS-16949, which calls for stringent system.

5. Research & Development :

The amount of investment a steel plant makes in research and development, new product development will encourage and bolster customer’s confidence in them.

Keeping abreast of technological improvements is a must.

Today many steel plants engage in early development of products with their customers’ right from the design stage. This has ensured that steel cannot be sold just as a commodity. This can be possible only with a strong R&D highly qualified team and modern testing facilities.

Steel plants should position themselves as steel solution providers rather than steel makers and sellers.

6. Distribution model / Geographical spread :

“Go to Customer” is the mantra for any product and in today’s scenario; Steel Industry seems to have aligned itself to this.

For any customer, they should feel that the steel plant is close to them. This is possible by means of service centers, stocking points.

For a Steel buyer to depend on the steel mill, it is important to ensure that the steel mill is flexible enough in deliveries and quantities.

There are service centers, stockiest, steel retail centers opened by many steel mills that take care of small and timely requirements of customers.

A buyer has to look if the steel mill has a robust distribution system with presence in major industrial/ end user hubs.

7. Sales Organization Structure:

For a Steel buyer, accessing the sales personnel irrespective of any level is the most important aspect.

The steeper and multi-level the sales organization structure, the difficulty level increases for a customer.

A buyer has to check as how customer friendly the sales team is and how their orders are taken care of. The key account manager plays a major role.

Also if there are Zonal managers, then the influence of Zonal manager over the top management plays an important role.

In many steel plants, the facilities and product may be good, but due to poor people management and attitude towards customer, their market share will dwindle.

A mutual understanding, developing a mutual trust and co-operation for the benefit of both the parties should be aimed at.

The sales organization structure should define the roles of each level with clarity and without any overlap.

8. Existing customer base / References :

One of the easiest ways of judging a steel mill is based on their existing clientele. While this can be a good and simple way, but this does not indicate that all customers can be served by the mill. The needs of every customer are different and only few steel plants can serve to diversified clients.

These are some of the important parameters that can be of relevance to all steel buyers,

If you are looking for a metric or a ranking method based on micro and macro parameters and base your decision making on this scientific method, please feel free to contact me at madhu@knowyoursteel.com

Steel Industry has evolved over past couple of decades thanks to the onset of industrial expansion and globalization, the number of steel producing companies have grown many fold. Many buyers of the previous decade would never forget those dreadful days when steel mills dictated the terms as buyers did not have many options, but to live with them.

The role of a purchasing manager in any organization is vital, as they have the onus of ensuring availability of right kind of raw material at the right time and right price for smooth production. Steel, being a technical product, leaves the job of a steel buyer even more strenuous.

Today’s steel buyers face a different challenge. With the availability of many sources globally, one has to be smart enough to select few mills on based on various factors and arrive at their decision on a scientific manner. This is crucial, as developing a steel source is a time, energy, resource consuming process and steel buyers have to invest in selecting and developing a source. So when the selection is done, they ensure that the steel mills support them for a long term. Any organization which is long-term oriented would follow the process of auditing the steel mills before selecting them as a supplier partner.

Following will help to answer ” How to Select a steel Mill”?

There are various factors that one should consider while selecting the steel mills. This can be broadly classified in to

Macro factors

Micro factors

In this blog, only macro factors are considered.

I.Macro Factors:

Macro factors can be common for many industries and some of them are specific to steel industry. Following are some of the key macro factors to be considered. ( These are mentioned not in the order of importance)

1. Backward Integration :

It is important that the steel plant is completely backward integrated so as to have effective quality control on most of the raw materials and reduce the dependence and supply/ availability vagaries of some of the key raw materials. Ideally the steel plant should have

Pellet plant / Sinter plant

Coke ovens

Raw material handling systems.

Iron making facility- Blast furnace / sponge Iron.

2. Captive Mines :

Some of the mills that have the lowest cost of production are those with captive mines viz., Iron ore and Coal. Today, this is the most important factor for any steel company in the world. Securing the raw materials over a long-term is what all integrated steel plants are looking at. All major steel companies are scouting for iron ore or coal mines globally and no surprise, we are seeing many Indian, Chinese companies taking over coal / iron ore mines in Australia and Africa.

The ideal situation for any steel plant would be to have own iron ore and coal mine. But this is not the reality. Very few companies have been prudent and fortunate enough to have them.

For the rest, tying up for the metallics on a long-term with the mining companies is the primary task.

3. Proximity to raw materials & Port :

For any steel mill, the proximity to the raw materials is a key factor. Since raw materials are required in large quantum, steel mills far off from the raw material source would end of paying more freight charges and eventually become less competitive.

Proximity to the port is another major factor. There are many steel plants that have built their own ports. This serves in both ways. Receiving raw materials and shipping / exporting finished goods.

Steel mills require huge amount of water for many of the operations and hence continuous availability of water is a must. Ideally steel mills are located close to fresh water bodies like, rivers, lakes.

4. Electricity :

Iron & Steel making consumes huge amount of electricity and many steel plants have commissioned captive power plants and grids to ensure their electricity cost is cheaper and continuous availability.

Blast furnace & Sponge Iron plant waste coming out at high temperature are normally utilized to produce power. Some of the steel plants have become so power sufficient that they sell the additional power to the local electricity board to generate additional income.

In developing nations, having a captive power plant significantly reduces the cost of power for producing steel.

5. Political Situation :

A stable political environment is a pre-requisite for any industry to survive. It is important that while selecting a steel mill, to know about the political situation of the state/county/country.

6. Pollution Control & Sustainability :

In a world of carbon credits, where the entire globe is trying to save the planet from global warming and reduce the green house gases and carbon-di-oxide emissions, it is important for a steel company to act in an environmentally responsible manner.

These days there are some indices available that rank companies on their environmental approach and sustainability.

Steel being the most recyclable material in world and can be reused 100%, steel mills should try to use as much as internal wastage as raw material, which not only save their input costs, but also helps the environment.

Many innovations have taken place in steel companies in Europe that enables steel mills to use less energy to produce steel.

But there are also many steel mills in the eastern part of the world and some in CIS that are quite old and these mills are more prone to pollute the environment. The age of the facilities of the steel plant can imply the company’s will to keep pace with modernization & technological capabilities and the pollution level based on the age of the facilities.

Sustainability & environmental friendly are important yardsticks for every steel buyer to check how environmental friendly their steel supplier is.

7. Stable Management , Vision & Mission :

For any company, a stable management is so crucial. If the company has changed many hands and frequently, then partnering with them for a long-term without proper understanding about the management’s future plans would be futile.

The vision & mission statement, speaks a lot about an organization, its ideologies, values, ethics etc. This throws light on where the company wants to be and how it intends to achieve it and whether this has percolated to all the employees.

It is also important for a buyer to understand as how the top management of the steel mill looks at a customer. Whether they are looking at long-term partners & customer friendly or whether they are opportunists.

8. Financial Status / Credit Rating :

Maintaining a financial discipline and ensuring a profitability business is the basis of any business.

Steel being a highly captive intensive product to produce, any steel company has to have deep pockets to wither the bad phase of the market and to ensure how to create value for all stake holders.

Steel Industry has witness many hostile acquisitions and sell-outs, mergers and acquisitions. All of them all majorly attributed to the poor financial status of the companies.

For a steel buyer, it is essential to know the debt level of the steel company and their credit worthiness.

There are various credit rating agencies that rate companies on their financial discipline from which a steel company’s creditworthiness can be gauged.

9. Safety Standards :

From the number of accidents that occur in a steel plant, one can make out how much emphasis was given to the safety of its employees.

If the company is accredited with OHSAS 18001, then it can be a good indicator that they take all safety precautions.

If there are frequent accidents, it shows that the company does not care about their employees, which indicates that they won’t care for their customers too.

If you are looking for a metric or a ranking method based on micro and macro parameters and base your decision making on this scientific method, please feel free to contact me at buzzmadhu@gmail.com.

Bill of Entry number is generated and information is sent to customs house

Group Appraiser assesses Bill of Entry

Audit Appraiser assesses Bill of Entry

Audit is approved by Assistant Commissioner – TR-6 is printed

Duty Payment at the bank

Examination of goods by Shed/ Dock Appraiser

Out of Charge is issued

CHA/ Importer can track the Bill of Entry using RES at any point of time and can reply to queries from customs house online and raise queries in case of any issue.

Once the self declaration / self assessment of goods is submitted through RES and after successful submission of signed check list, the Bill of Entry then appears in the screen of the respective Group Appraiser. The Group Appraiser then assesses the Bill of Entry on the system and marks it to the Audit Appraiser. After the Audit is complete, the Bill of Entry appears in the screen of the concerned Group Assistant Commissioner. This assessment is then approved by the Asstt. Commissioner concerned, TR-6 is printed at the Service Centre for payment of duty. The Examination Order is also printed along with the TR-6 Challan.

If the Appraiser does not agree with the importer regarding tariff classification / notification / declared value etc., he can raise a query in this regard. The Importer/CHA has to enquire at the Service Centre whether there is any query in respect of their Bill of Entry and should reply to the same through the Service Centre if there is any.

TR-6 is the challan for payment of duty with the banks. The duty is to be paid through the designated bank. Online payment of duty is also available. Upon receipt of duty payment, bank endorses the payment and issues it to customs house.

After payment of the Duty, the Bank enters the same into the system at a terminal at their end. Then the Bill of Entry appears on the screen of the Appraiser (Docks). The Importer/CHA should present a copy of the bill of entry along with duty paid challan and other original documents including invoice, packing list etc. at the time of examination of the goods to the examining officer.

The Shed Appraiser shall examine the goods and enter the examination report in the system. After the examination of the goods is complete, the Appraiser (Docks) would give the “Out of Charge” order on the system. Thereafter, the system will print two copies of Bill of Entry for the importer and the Exchange Control Copies.

In case of any discrepancy found in the docks with respect to the goods, the same is reported to the respective Group through the system with the comments of the Dock Officers. On the basis of the examination report and the comments of the dock officers, the Group may revise the assessment or may raise a query.

Steel is a highly capital intensive product to produce. By virtue of the “Corporate Brand” and the brand equity of a steel company, more often than not, the product gets sold by itself. Steel companies are normally big entities but most of the steel consuming firms are not as big as the steel producers, making the Steel companies to decide on how they price the product and what product they offer and how do they offer them.

Most of the steel professionals would agree that it is impossible to produce steel without rejections and complaints are bound to occur. However, it is also impossible to have a 100% quality check of end products before being dispatching from factory. So this leaves one to ponder as how quality is controlled at Steel Mills? The quality of a steel product is taken care of to a greater extent by the production facilities that the company employs. Any wise Steel buyer can say to a certain extent if the steel from a steel company is better or not based on the technology and the facilities used by the mill.

The above factors (viz., Brand name and Quality Control) significantly take care of the sales of any steel product.

So this leaves a case to look at the roles of sales managers and traders in steel Industry.

Steel Companies can be broadly classified in to

Primary Steel Producers (or Major Steel producers)

Secondary Steel producers

Steel Trading Firms

Service Centres

Steel Stockists

Role of a sales manager is different in each of the above mentioned category.

Let’s touch upon the primary, secondary producers and the trading firms as they form the majority of steel companies.

Sales Managers in Primary and Secondary Steel Producers:

The role of Sales Department in many of the primary steel producers, is to allocate the production quantity based on the guidelines set by the management and forecast it (it can be export oriented, margin oriented, end industry oriented, product oriented etc).

The orders normally come to these steel companies. But with a sales manager, the profit margin becomes better.

Some of the important roles of the sales manager in a Steel Producing Company are,

To carry the company’s brand name to the market. Their actions will reflect on the image of the company.

To increase the profitability of the company, by aiming to sell the products at a higher margin ( a well- educated B- school grad is not required to sell a product at a much lower price).

Act a liaison between the management and the customers and try to meet the expectations of both of them.

Co-ordinate the entire sales activity from order intake till delivery.

Constant feedback to the management from the market and decide on future strategy.

The individual as such may not have a greater significance in bringing out a major change in any steel producing company. The rules are normally laid with a top-down approach and sales managers are carriers and implementers of these to the market.

Mostly the sales managers in such companies are called “Key Account Managers” and their roles would normally to co-ordinate and ensure customer orders are being delivered in time and to carry out the “Paper Work” and documentation as required by their company.

Trader in Steel Trading Companies:

The role of the Trader (cannot be called a sales manager as the role is beyond being a sales manager) is vastly different from a sales manager.

In a Steel trading company, the assets are their people, networks and trade finance.

A Trader has following addition roles to play over and above the roles mentioned above,

Explore the whole steel market to look at opportunities.

Be dynamic and establish contacts and build credibility with Steel mills (source)

Develop customers and gain their confidence

Create value addition to act in between the producer and consumer

Ensure revenue generation with fewer risks.

Gauge the trustworthiness of both producer and consumer before financing a deal.

Unlike the sales managers of a steel producing company, a trader is quite significant for a steel trading company as a traders are viewed as individual profit centers and revenue generators for the firm, which is not the case in a steel mill ( Irrespective of sales manager, a steel mill can sell its products).

Trader has to act in a timely manner to have the correct information on all fronts to make a deal.

For steel mills, they have the option to sell/ pick and choose customers. But for a trader, the job is tougher they have to prove their value both to the source and consumer and they have to identify the segments where there is a need / gap and which is currently not being serviced.

In other words, Traders act as entrepreneurs and work as if the company is theirs. This attitude is really important for any trader. As in a steel company, the sales manager has the option of selling less to reduce the work load and still being able to be a “good performer”, which is not the case in a steel trading firm.

Many Steel companies outsource the sales to established Steel trading firms to represent them in different countries as setting up their own offices and establishing them would be a costlier and time consuming process.

Following are some of the attributes (not in order or ranking) of a good sales manager/ trader

The “HUNGER” and “PASSION” to sell more and not be complacent

The “URGE” to do things and get things done as fast as possible.

“NETWORKING” Skills

“PERSEVERENCE”

Ability to gauge people – “INTERPERSONAL SKILLS”.

Ensuring “CUSTOMER SATSFACTION”

“NO EGO” but maintaining “SELF RESPECT”.

I still remember the words from a steel professional to his sales managers, which I think is suitable for any business “At the end of every conversation, customer should get a feeling that he has won it. But actually you should have won it.”

The most versatile, recyclable, environmental friendly metal in world – Steel, is an amazing metal. It has answers to all applications, products.

For Steel users, it might be a tough task in getting to know the different coated steel products that are available, their significance and selecting the right product that suits their application the best.

This article is aimed at helping a bit in knowing the differences between various coated steel products and their usage.

Basically there are four types of most commonly used metal based steel coated products

Galvanised (GI)

Galvannealed (GA)

Galvalume (GL)

Galfan (GL)

Aluzinc – Not considered here as its usage is not very high.

The above mentioned designations viz., GI, GA, are normally used as a short form to designate the grades. This nomenclature can be different in different countries.

The basic purpose of coated steel is to prevent corrosion and enhance the surface life of base metal. Zinc acts as a cathodic protection and prevents the base metal from corroding. Each of these coated steel has its own application, depending on where they are used and to which environment they would be exposed to.

The below table illustrates the basic differences between these metallic coated steel products in a simple way.

Table 1

S.No

Parameter

Galvanized

Galvannealed

Galvalume

Galfan

1

Coating

Zinc on Steel

Zinc on Steel.

Zinc reacts with Iron to form Zinc iron alloy

43.5% Zinc; 55% Aluminium; 1.5% Silicon.

95% Zinc, 5% Aluminium on Steel

2

Coating designation

Z

ZF

AZ

ZGF/ZA

3

Application

Ducting, roofing

Deep drawn Automobile parts/ outer panels

Metal Buildings/ Roofing

White goods/ some automobile parts

4

Corrosion resistance ( on a scale of 1 to 5)

3

2

4

5

5

Spangle on surface

Present

No. Matte finish surface

No

No

6

Method

Hot dipped continuous or Electrogalvainsed

Annealing after hot dipped galvanising

Hot dipped continuous

Hot dipped continuous

Galfan is the most recent invention of the above.

Galvalume and Galfan are registered and patented trademarks brands and only those manufacturers with license from the brand owners can produce and sell in these brands.

There are different grades within each variety of above products based on

American and European Standards are most commonly used to designate the grades of coated products.

Color coated steel (Pre-painted steel) is normally on base material of GI, GL. They are designated as PPGI and PPGL. Products of GI and GL when sold without color coating or pre-painting, they are referred as “Bare” GI or “Bare GL.

Pre-painted Galvanised iron (PPGI) & Pre-painted Galvalume (PPGL). PPGL is the famous of the two.

There is one more coated product available in market called “Aluzinc” & “Aluminized Steel”. These are not considered here, as their demand is not significant compared to the other types mentioned here.

India being a net importer of steel is fairly an open & WTO compliant market for many countries to trade its steel products.

For the past year and a half, many must be pondering over the announcements of BIS (Bureau of Indian Standards) on regulation for steel imports. Though some of them in the trade are fairly apprised of the regulation, it can still be a jinx for many.

This article helps in understanding this steel import regulation in India, which is BIS approval

Owing to concern on the quality of steel being imported, there have been some initiatives to prune on the quality front, to have a check on the inflow of inferior quality and to maintain quality standards.

BIS, a government regulatory body has made it mandatory for all the steel companies (manufacturers) to get themselves approved and registered under BIS, to sell steel in India.

These regulation necessitates all steel mills wanting to export its products to India to apply for the BIS registration, along with all requisite documents, and have the mill audited. BIS registration can be a fairly time consuming process and companies applying for it should already have this in mind.

It should also be noted that not all steel products come under the gamut of BIS regulation.

I have divided the list to flat and long products and highlighted the products that fall under BIS and have also enlisted the products that are exempt of it.

The initial notifications exempted thickness > 80 mm and < 6mm from BIS. But subsequent notifications have made BIS mandatory for these dimensions as well.

In general all Hot rolled carbon steel flat products comes under this regulation.

All Alloy Steel flat products does not fall under BIS.

Following Flat products are exempt of BIS:

All Cold rolled products, other than electrical steel mentioned above.

Galvannealed

Galvalume (bare)

Galfan

Aluzinc

All pre-painted steel

Aluminized steel

Tin Plate

Stainless Steel – Coils / Sheets – Hot and Cold Rolled.

Long Products & Semis:

Following long products fall under BIS regulation

Similar to Flat products all carbon steel semis (irrespective of dimension) are subjected to BIS regulation

Ingots

Billets

Blooms

Slabs

Re bars 8 mm and above

Structural grade wire rods and wires

Beams – 610 <Depth <= 1016 mm

Columns – 305 <size <= 356

Angles – between 50x50x4 to 100x100x8

Following Long products are exempt from BIS:

Pipes/ tubes (ERW, Seamless, CDW)

Alloy steel semis – Billets, Blooms, Slabs, Ingots.

Alloy steel bars ( hexagons, square, flat, rounds, octagons)

Alloy steel wire rods and wires

Stainless steel bars ( flat, round, square,hexagon, octagon)

Re-bars less than 8 mm.

Bulb Flats.

Having gone through the products that does/ doesn’t fall under BIS, there can be a question of what is the definition of alloy steel and what is the minimum alloying content required to qualify as an alloy steel. The definition of alloy steel according to Indian customs is given below,

Definition of Alloy Steel:

If any of the following alloying element is greater than or equal to below mentioned level, the steel will fall under alloy steel category.

Steel not complying with the definition of stainless steel and containing by weight one or more of the following elements in the proportion shown:

– 0.3% or more of aluminium

– 0.0008% or more of boron

– 0.3% or more of chromium

– 0.3% or more of cobalt

– 0.4% or more of copper

– 0.4% or more of lead

– 1.65% or more of manganese

– 0.08% or more of molybdenum

– 0.3% or more of nickel

– 0.06% or more of niobium

– 0.6% or more of silicon

– 0.05% or more of titanium

– 0.3% or more of tungsten (wolfram)

– 0.1% or more of vanadium

– 0.05% or more of zirconium

– 0.1% or more of other elements (except sulphur, phosphorus, carbon and nitrogen), taken separately.

The initiative from BIS to dissuade the import of inferior quality is undisputable, but looking at the time taken to get the BIS registration, one tends to ponder if this is a way to insulate the domestic industry from cheap imports.

No wonder India still continues to receive quite a good amount of hot rolled coils, plates, wire rods from China with Boron added which does not fall under BIS !!

Manufacturing industry has seen manifold growth over the past decades; It might lack a bit of glamour and exuberance attached with the IT & service industries. Nevertheless, it is the backbone of any economy.

Steel Industry – One of the major drivers of an economy along with other major manufacturing industries viz., cement, power, electricity, mining. Steel due to its versatility and vast usage, is a quintessential product and forms one of the important raw material for many manufacturing companies. This makes sourcing of steel a critical and crucial role in an organisation.

Due to its vast usage in many different applications, and innumerable grades and the kind of volatility steel market has been witnessing in the last few years, Steel sourcing can really give hard times for the purchaser, to surf for the list of producers and then zero in on the right supplier(s). Most of the times, they get entangled by the technical stuff.

As a Steel marketer since the inception of my career, I have always been keenly watching, learning from my peers, competitors, colleagues, as how they handle different steel buyers, their approach to different situations, their persuasive skills, their timing to decide as when to lie low and hold their horses and when to stick on to their guns.

As equally, I have also watched many of the steel industry admired “purchasing managers”, as at times, I switch chairs across the table to be a steel buyer as well.

Steel Industry has matured and evolved in time. The very word “Allocation” from the steel mills is dreadful . In the past, many steel buyers would have to plead the steel mills to increase their allocation, lest their production would halt!

Thanks to the expansion and globalization of steel Industry, today the situation is other way round and we all are witnessing a “glut”, making the job of the buyer easier than in the past.

Given this stance, a steel buyer cannot be complacent as today, there would be many suppliers knocking the doors of buyers wanting to partner with them to service their steel needs.

When “Selling Steel” is an art, “Buying Steel” is definitely an art too, given the complexity in buying steel. It’s just not merely jotting the prices of series of suppliers in an XL sheet and selecting the lowest supplier by price, which even a school kid would do!

This prompted me to write about “Art of Sourcing Steel”.

Some of the vital roles of a steel buyer are,

Finding the producers of the type of steel required

Understanding/comparing the capabilities, strengths and weaknesses

Analyzing the financial stability of the company and their long-term goals

Selecting the right supplier(s) from the lot.

Developing and maintaining mutually successful business relationship

Rating and reviewing the performance of supplier from time to time

Having a close-eye on new potential suppliers.

In any long-term oriented organization, some of these processes would be followed.

Of all this, I personally believe “Relationship” drives business more than anything else. This can hold good for any product. Irrespective of price competitiveness and quality if product, if there is no mutual trust and mutual respect between the organisations and between people involved in business, any business relationship cannot last long.

Relationships at times many not yield benefits on a short-term, but it is one of the effective tools for a long-term benefit for a steel business. This would reduce development costs both sides ( cost of developing a source for buyer and a customer for seller).

For example, A steel supplier’s behavior can be gauged as how they behave when there is excess demand/ short supply. Similarly, a steel buyer can be judged as how they align themselves when there is abundance in steel market coupled with modest demand.

If a steel buyer or seller does not tend to behave differently by not trying to make quick buck in these circumstances and stick on to their commitment, then we have a successful long term beneficial relationship.

Unfortunately, due to market compulsions, there are companies, that are opportunistic at times, and use the services of suppliers by sucking the supplier till their last blood, especially, when the supplier is in dire need of business. But this is so true vice-versa as well. This can yield short term immediate benefit. But, this will definitely not yield long-lasting results.

Associating with a new supplier for every new requirement, would not only increase the cost of sourcing ( as this has the element of risk involved), it also deprives the organisation of the opportunity to build-on a relationship with an existing source by imposing trust on them.

Today, suppliers are a company’s partners and are considered as equal to any other stake holders. It is those companies who quickly realize this, will stand to reap the benefits on a long-term.